What will it take to slow this economy down?
In 2001, railway workers slowed a runaway train in Ohio by latching a second engine to the back of the locomotive and applying the brakes. In all, the train traveled sixty-six miles over two hours, decelerating from a maximum speed of 47 miles per hour to 10 miles per hour before workers regained control of it, according to CNN.
Throughout 2022, the United States Federal Reserve has been trying to slow inflation by putting the brakes on the U.S. economy. So far, the Fed has raised rates six times, but the economy continues to grow apace. Last week, the Bureau of Economic Analysis reported the economy grew faster than originally thought from July through September 2022. Gross domestic product (GDP), which is the value of all goods and services produced by the U.S., was up 2.9 percent, annualized, rather than 2.6 percent as the advance estimate indicated.
Last week’s unemployment report also suggested the economy remains strong. More jobs were added than economists expected, and the unemployment rate remained at 3.7 percent. Average hourly earnings also increased faster than expected, up 5.1 percent over the last 12 months.
Megan Cassella of Barron’s reported, “The biggest outstanding obstacle to the Federal Reserve’s success in reining in inflation boils down to a numbers problem: There aren’t enough workers in the [United States]. Simply put, labor supply and demand need to come back into balance to contain wage growth and services inflation, which continues to climb…A combination of factors is contributing to the dearth of workers, from Baby Boomer retirements and falling immigration to a low birth rate and long COVID. Together, they suggest that shortages are here to stay.”
Last week, stock and bond markets rallied following Fed Chair Jerome Powell’s mid-week speech, in which he confirmed it was likely December’s rate increase would be smaller than the last few increases have been. Later in the week, the strong employment report checked investors’ enthusiasm. Regardless, major U.S. indices finished higher, reported Nicholas Jasinski of Barron’s, and Treasury yields finished the week mostly lower.
| Data as of 12/2/22 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
| Standard & Poor's 500 Index | 1.1% | -14.6% | -11.0% | 9.4% | 9.1% | 11.2% |
| Dow Jones Global ex-U.S. Index | 1.3 | -17.0 | -14.7 | 0.0 | -0.6 | 2.2 |
| 10-year Treasury Note (yield only) | 3.5 | N/A | 1.5 | 1.8 | 2.4 | 1.6 |
| Gold (per ounce) | 1.9 | -1.9 | 1.1 | 6.9 | 7.0 | 0.4 |
| Bloomberg Commodity Index | -0.4 | 15.4 | 20.3 | 14.1 | 6.0 | -2.2 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
CAN YOU BELIEVE IT’S DECEMBER ALREADY? According to Andy Williams, Garth Brooks and Kylie Minogue, “It’s the Most Wonderful Time of the Year.” During December, holiday enthusiasts don ugly sweaters, wheedle recipes out of relatives, light a wealth of candles, and celebrate a diversity of holidays. See what you know about this magical time of the year by taking our brief quiz.
If you have any questions, get in touch.
Weekly Focus – Think About It
“Gratitude unlocks the fullness of life. It turns what we have into enough, and more. It turns denial into acceptance, chaos to order, confusion to clarity. It can turn a meal into a feast, a house into a home, a stranger into a friend.”
—Melody Beattie, author
Answers: 1) d; 2) c; 3) b; 4) b
Sources:
https://www.cnn.com/2001/US/05/15/runaway.train.05/
https://www.bls.gov/news.release/empsit.nr0.htm (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/12-05-22_Barrons_Why%20the%20Fed%20Must%20Cause%20More%20Pain%20to%20the%20Job%20Market_4.pdf)
https://www.barrons.com/articles/fed-interest-rate-hike-inflation-wage-growth-job-market-51670025045 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2022/12-05-22_Barrons_Stocks%20Rise%20on%20Cooling%20Inflation%20and%20Fed%20Moderation_5.pdf)
https://en.wikipedia.org/wiki/It%27s_the_Most_Wonderful_Time_of_the_Year
https://www.brainyquote.com/authors/melody-beattie-quotes
https://nationaltoday.com/january-holidays/#jan-6
https://www.sciencedirect.com/science/article/abs/pii/S105774081730044X
https://www.pwc.com/us/en/industries/consumer-markets/library/2022-holiday-outlook-trends.html
